arabtec holding investor presentation -...
TRANSCRIPT
Investor Presentation March 2017
arabtec holding
ARABTEC HOLDING
arabtec holdingTransitions of Focus
Where we were Current position Immediate future
Deliver cash earnings and returns
Re‐energise capital
Create a performance‐driven culture e.g. align remuneration with performance
Enhance investor trust and overall market confidence
Work towards meeting market expectations
Build a stronger foundation to successfully sustain the Group into the future
Significant financial and operational challenges
― Requiring additional financial resources to fund projects under execution
― Operating with constrained liquidity
In need of steady leadership and organisational focus
New CEO appointed
― 3 decades of industry experience
― CEO of Depa Ltd, and previously Leighton Holdings
Strategy reformulation and implementation
― Strengthen balance sheet via Recapitalisation Programme
― Recalibrate the business towards profitable growth
― Ongoing recruitment of executive management team
Projects backlog (i.e. work in hand) of approximately AED 18.1 billion
Strong opportunities across core markets
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arabtec holding
(2.3)
(3.4)
FY15Audited
FY16Preliminary Unaudited7.3 7.7
FY15Audited
FY16Preliminary Unaudited
6.1
8.4
FY15Audited
FY16Preliminary Unaudited
19.3 18.1
FY15Audited
FY16Preliminary Unaudited
Financial Highlights
The Group undertook a comprehensive review of its balance sheet and recognisedimpairments of AED 2.8 billion on high risk items during 2016
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Backlog New Wins
Revenue Net Profit (Loss) Attributable to Parent
+38%‐6%
+6%
45%
(AED bn)
(AED bn)
(AED bn)
(AED bn)
Note: the Group includes Arabtec Holding, Arabtec Construction, Target, EFECO and other subsidiaries
arabtec holding
OUR VISION
OUR MISSION
OUR APPROACH
OUR VALUES
Building our Future
To develop social and economic infrastructure efficiently and sustainably, as the result of long term relationships with our clients and partners
Arabtec has truly integrated capabilities providing clients with a full range of services up and down the value chain.Arabtec’s control over its value chain, via its subsidiaries, is a unique competitive advantage ensuring maximum value add for our clients and shareholders
INTEGRITY PROFESSIONALISM COMMITMENT TEAM SPIRIT ACCOUNTABILITY
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How We Do It
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arabtec holding
Phase 2: 2018
Prepare
Consistently secure annual backlog of new projects of at least AED 8‐9 billion at Group level Maintain leaner organisation with SG&A at target benchmark level Ensure on‐time and on‐budget delivery of projects Risk management framework Remuneration framework Capital recycling
Phase 1:2017
Stabilise
Implementing the Recapitalisation Programme Establishing Arabtec Holding as a strategic management company Building and implementing a strong risk management approach Stabilising the Group’s organisation structure and role Embedding a performance‐based culture Resolving legacy project claims, receivables and WIP Disposal of non‐core assets
Phase 3:2019+ Grow
Consistent growth in net profit and improved cash flow generation Attract, retain, and develop appropriate resources to deliver growth Continue to improve project gross margins and ensure on‐time delivery Identify, develop, and export core capabilities for future growth Grow capabilities in
MEP Infrastructure
Target return to dividend distribution Grow from existing capital base
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Engineering, Procurement, Construction and Management (EPCM) Special construction
Strategic Approach is Based Around Three Distinct Phases
arabtec holding
Stabilising the Group’s organisation structure and role
Develop a risk management process and culture across the Group Establish the ability to strictly monitor projects’ cash flow and provide management with
information on the progress, risks and opportunities associated with projects Implement a gate control process for all pre‐contract activities to ensure work won feeds a
pipeline of profitable projects
Building and implementing a strong risk management approach
Transform Arabtec Holding into a strategic management company and ensure alignment with the Group’s vision, mission, and values
Refocus the Group on its core competencies and key geographies Measure, manage and control risk, selectively allocate capital, track and manage the performance
of the Group’s operating entities and investments Develop cooperation across operating entities
Establishing Arabtec Holding as a strategic management company
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Group CEO’s Agenda
Rights Offering and Capital Reduction announced on 13 February 2017 Restore the Group’s balance sheetImplementing the
Recapitalisation Programme
Establish and implement the Group structure Review Group‐wide delegation of authority (DOA) aligned with the operating model Create a solid foundation of processes to monitor and drive the performance of the Group and its
operating entities, including the implementation of an ERP system Simplify, harmonise and automate processes, policies and procedures
arabtec holding
Conduct a strategic review of the portfolio of current investments Dispose of non‐core investments Recycle capital to generate cash and sustainable returns on capitalDisposal of non‐core
assets
Implement action plan on legacy claims, receivables, and WIP to enable the Group to focus on the future growth of the business without being restricted by problems from the past
Strengthen relationships with banks Establish a Treasury plan
Resolving legacy project claims, receivables and WIP
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Group CEO’s Agenda (cont’d)
Instil a strong performance culture with accountability balanced with the empowerment of our people
Support the development of capable, empowered senior teams at Arabtec Holding and its operating companies
Align the reward and remuneration of key executives with KPIs that support shareholder returns Develop the Group’s short‐term incentive (STI) plan
Embedding a performance‐based culture
arabtec holding
Arabtec requires new capital to fund completion of ongoing projects, support Management’s business plan, and provide financial flexibility to pursue growth opportunities
A stronger financial position for the Group All stakeholders to benefit
Recapitalisation Programme is subject to approval of shareholders and the Securities and Commodities Authority
General Assembly to be scheduled during April 2017 to provide details on structure of Recapitalisation Programme and to vote on resolutions
Recapitalisation Programme Overview
Recapitalisation Programme
Step 1: Rights Offering
Step 2: Capital Reduction
Context
Important Notes
Expected Outcomes
Approach
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To secure a sustainable and successful future, the Board has launched a Recapitalisation Programme to raise AED 1.5 billion in equity and extinguish accumulated losses
Company has received approval in‐principle from
the Securities and Commodities Authority
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Step 1: Rights Offering
Offer price to be determined
All shareholders will be invited to subscribe to the Rights Offering
Arabtec’s largest shareholder, Aabar Investments PJS, has committed to subscribe to its full entitlement under the Rights Offering and any unsubscribed shares remaining up to AED 1.5 billion, reflecting its continued support for the Group
Upon completion of the Rights Offering, the paid‐up capital of the Group would increase from AED 4.6 billion up to AED 6.1 billion (subject to completion of FY 2016 audit)
Group intends to finalise key
terms of the Recapitalisation
Programme towards the end
of March 2017 in conjunction
with releasing its FY 2016
audited accounts
Raising AED 1.5 billion in equity via a fully committed Rights Offering by issuing new shares
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Step 2: Capital Reduction
After the Rights Offering, Arabtec’s share capital will be reduced on a pro‐rata basis
Group’s accumulated losses
limit ability to raise new
equity. Extinguishing
accumulated losses on the
balance sheet enables
Arabtec to secure a fully
committed Rights Offering
As a subsequent step following the Rights Offering, Arabtec’s share capital will be reduced via cancellation, on a pro‐rata basis, of shares to extinguish the entire accumulated losses on the balance sheet
Accumulated losses as of 31 December 2016 are estimated at approximately AED 4.6 billion (including net loss of AED 3.5 billion recorded for FY 2016), subject to completion of FY 2016 audit
Based on 2016 preliminary unaudited financial results, the Capital Reduction would be up to 4.5 billion shares
Capital Reduction would have no dilutive impact as the shares would be cancelled pro‐rata to shareholders’ holdings following completion of the Rights Offering
arabtec holdingGroup Structure
Arabtec Holding
Operating Entities Investments
100% 100% 24% 14% 80% 100% 100% 100%100%
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Arabtec holding PJSC comprises three operating entities and nine investment companies. Delivering on integrated capabilities is a material competitive advantage and core focus area for the Group
Construction EPC MEP
ArabtecConstruction
L.L.C
Target Engineering
Construction Co. L.L.C
Emirates Falcon Electromechanical
Co.
Depa Jordan Wood
Industries Co.
ArabtecEngineering Services
Gulf Steel Industries
ArabtecPrecast
Austrian Arabian
Ready Mix
• NBK Ready Mix
• HoE• Envirogreen
Other Investments
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Core Competencies
Hospitality
Commercial
EPCM
Residential
Economic Infrastructure
Social Infrastructure
Arabtec is a leading contractor for social and economic infrastructure. Through its operating entities and investments, the Group delivers construction and infrastructure projects, including:
Burj Khalifa(Dubai)
Infinity Tower(Dubai)
Emirates Hills(Dubai)
Emirates Palace(Abu Dhabi)
Bahrain Airport(Manama)
arabtec holding
Commercial 70%
Infrastructure 13%
Industrial13%
MEP 4%
By Sector
18.1
2016
Project Backlog End of year, AED Billion
Backlog Analysis
Arabtec maintains a healthy backlog of AED 18.1 billion; 67% of the Group’s backlog is in the UAE
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UAE 67%Bahrain 12%
KSA 7%
Kazakhstan 6%
Others 8%
By Geography
ArabtecConstruction 81%
Target 14%
EFECO 4% Other subs. 1%
By Subsidiary
arabtec holdingArabtec Footprint
Holding a strong GCC footprint with a major focus on UAE market. Arabtec is becoming increasingly selective with projects especially in KSA
14* Represents original award value of projects
UAE AED 16.7 bn*Midfield Terminal
Al Ain Hospital
Louvre Museum
West Yas villas
UAE Housing
Twin Towers
Fairmont Hotel
Lilian Towers
Other projects
Qatar AED 3.0 bn*Msheireb Downtown
Twin TowersBahrain AED 2.4 bn*Bahrain Int. Airport
ABG Towers
Saudi Arabia AED 1.0 bnDhahran Residential Com.
Other countries AED bn*Kazakhstan 2.2
Jordan 1.6
Kuwait 0.9
India 0.7
Egypt 0.4
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GCC GDP FORECAST1 UAE CONSTRUCTION SECTOR GROWTH (%)2
OIL PRICES FORECAST (ICE Brent US$/BBL)4 KSA CONSTRUCTION SECTOR GROWTH (%)5
55.9 55.9 62.0 62.0 65.0
Feb2017A 2017F 2018F 2019F 2020F
External Environment and Economic Outlook
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US$bn 2016E 2017F 2018F 2019F 2020F 2021F CAGR
638 689 740 778 817 855 6.0%
375 408 435 463 497 531 7.2%
157 171 189 203 216 229 7.9%
32 34 36 37 39 41 5.1%
39 42 44 47 50 54 6.4%
Arabtec core markets are expected to rebound, supported by reinforced market fundamentals and catalyst events such as Expo 2020 and Abu Dhabi 2030 vision
6.6%
8.7%
6.5% 6.2%
2.8%3.6% 3.9% 4.2% 4.7% 5.1%
2016E 2017F 2018F 2019F 2020F 2021F 2022F 2023F 2024F 2025F
Expo 2020 impact: AED11bn to be awarded by end of 20173
5.6%
0.5%
1.9%
4.4%5.2%
7.5%7.0%
6.0%6.5%
6.0%
2016E 2017F 2018F 2019F 2020F 2021F 2022F 2023F 2024F 2025F
1. International Monetary Fund2. BMI Research – UAE Infrastructure Report 3. EXPO 2020 Dubai Announces 37 Construction Contracts Worth AED 11bn for
2017 retrieved January 30, 2017 from http://expo2020dubai.ae
4. Bloomberg5. BMI Research – KSA Infrastructure Report
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Important Notice and Disclaimer
This document has been provided to you for information purposes only. This document does not constitute an offer of, or an invitation to invest or deal in, the securities of Arabtec Holding PJSC (the “Company”). The information set out in this document shall not form the basis of any contract and should not be relied upon in relation to any contract or commitment. The issue of this document shall not be taken as any form of commitment on the part of the Company to proceed with any negotiation or transaction.
Certain statements contained in this document constitute forward‐looking statements relating to the Company, its business, markets, industry, financial condition, results of operations, business strategies, operating efficiencies, competitive position, growth opportunities, plans and objectives of management and other matters. These forward‐looking statements are not guarantees of future performance. Rather, they are based on current plans, views, estimates, assumptions and projections and involve known and unknown risks, uncertainties and other factors, many of which are outside of the Company's control and are difficult to predict, that may cause actual results, performance or developments to differ materially from any future results, performance or developments expressed or implied from the forward‐looking statements.
The Company does not make any representation or warranty as to the accuracy of the assumptions underlying any of the statements contained herein. The information contained herein is expressed as of the date hereof and may be subject to change. Neither the Company nor any of its controlling shareholders, directors or executive officers or anyone else has any duty or obligation to supplement, amend, update or revise any of the forward looking statements contained in this document, whether as a result of new information, future events or otherwise, except as required by applicable laws and regulations or by any appropriate regulatory authority.
Backlog and new contract awards are non‐IFRS metrics based on management’s estimates of awarded, signed and ongoing contracts which have not yet been completed, and serve as an indication of total size of contracts to be executed. These figures and classifications are unaudited, have not been verified by a third party, and are based solely on management's estimates.
